A file picture taken in Ankara on June 24, 2014 shows Turkey's Prime Minister Recep Tayyip Erdogan adressing MPs at the Turkish Parliament. Prime Minister Recep Tayyip Erdogan appears all but assured of winning upcoming Turkish presidential polls, but he could find himself in charge of a far more fragile economy than in the last decade of his rule. Analysts say the Turkish strongman is jeopardising the long-term health of the economy by picking a fight with the nominally independent central bank and pushing it towards a looser monetary policy at a time of stubbornly high inflation. (AFP)

ISTANBUL/ANKARA, July 7, (RTRS): Turkish officials say key economic ministers will stay in post if, as expected, prime minister Tayyip Erdogan becomes president next month, and they dismissed fears that policy would take a populist turn, jeopardising more than a decade of strong growth. As the first direct election to the presidency approaches, Erdogan’s outspoken criticism of the Central Bank’s tighter monetary policy and a planned tax amnesty that could waive billions of lira in unpaid taxes have raised concerns among investors that crowd-pleasing measures could weaken economic discipline. There has also been speculation that the highly regarded double act of finance minister Mehmet Simsek and deputy prime minister Ali Babacan could be broken up in favour of more colourful political figures, but senior government officials told Reuters that was unlikely. “These policies will continue with the same decisiveness. The Ministers who will implement them will continue in their posts; there does not appear to be a question mark about that,” one senior official said.“In particular, there is no problem concerning Babacan and Simsek. It is seen as certain they will continue their duties.”

Although any future cabinet would be selected by Erdogan’s successor as prime minister, analysts and officials widely expect that as president, Erdogan would secure a loyalist for the job. Babacan and Simsek have guided the Turkish economy towards unprecedented stability in recent years, whilst trying to tackle long-term imbalances including inflation and a stubborn current account deficit. Erdogan is acutely aware of the importance of their investor-friendly, prudent approach to Turkey’s international credibility, which should guarantee they remain a team at least until 2015 parliamentary elections, government officials say. Economy Erdogan’s personal preference for a more pro-growth economic policy has, however, given rise to talk of a battle of wills in the top tiers of government that could shift in his favour if, as expected, Babacan leaves politics after the parliamentary elections. “So far Babacan and Simsek have complemented each other. It is difficult to say what will happen in the long term, but under current circumstances Babacan will quit politics and run his own business,” another senior government official said, noting that the reserved and somewhat enigmatic deputy prime minister was reaching a three-term parliamentary limit imposed by the ruling AK Party.

That uncertainty adds to the worries of investors already uneasy about growing security risks from neighbouring Syria and Iraq, government interference in monetary policy and the prospect of Turkey becoming more authoritarian under an Erdogan presidency. If Erdogan triumphs in August’s polls he is expected to take on a refashioned presidency, pushing for more executive powers in what has hitherto been a largely ceremonial role. Since he came to power in 2002, Turkey has enjoyed strong economic growth, averaging more than 5 percent in his first decade, and inflation has fallen to 9.32 percent as of June from 32 percent. However, some analysts argue that without fundamental reforms, such as upgrading its governance institutions and improving its education system, Turkey will likely see growth of only 2 to 4 percent over the long term. Babacan and Simsek are sharply at odds with others in government who, backed by Erdogan, have been pushing in particular for the central bank to cut interest rates sharply after a steep hike in January to halt a slide in the value of the lira.